The Czech National Bank issued its own bonds as tokens on a distributed ledger technology platform to execute test transactions.
The counterparty for the test transactions was Česká spořitelna, with each bond carrying a nominal value of 10,000 korunas, equivalent to roughly 409 euros. The central bank reported that the processing happened almost immediately.
The crown-denominated paper sits on the DLT platform of the Prague Stock Exchange’s central depository, which also registers and settles the trades. According to the central bank’s announcement regarding the first DLT bond, the tests covered transfers, purchases, and sales executed delivery-versus-payment, alongside repo operations where the bond serves as collateral for a loan.
The counterparty, Česká spořitelna, operates as part of the Vienna-based Erste Group. The transactions took place across October and November, moving forward with near-instant settlement. The bank kept the amounts intentionally small, capping the total volume at tens of thousands of korunas.
Governor Aleš Michl outlined the policy rationale at a conference in Prague. He argued that a small currency only has a future in the digital world if it relies on a functioning market for crown investments and a high-quality domestic settlement infrastructure.
“The central bank must be involved from the beginning so that central bank money, rather than private money like stablecoins, sits at the core of settlement,” Michl said, as he discussed the digital crown.
The target is a deep market for crown assets that trade with greater ease than German bunds. For managing its currency reserves, the central bank also invested in an euro-denominated sovereign bond that exists exclusively on a DLT, though the issuer remains unnamed.
The DLT bond marks the latest project from the CNB Lab innovation lab. A year ago, the central bank established a test portfolio outside its reserves totaling 1 million dollars, worth about 905,000 euros, to trial bitcoin, a dollar stablecoin, and a tokenized deposit.
While the Czech Republic stays outside the eurozone, the European Central Bank and national eurozone central banks launched the Pontes platform on September 21 to let banks settle tokenized securities transactions in central bank money. Early participants include Deutsche Bank, DZ Bank, KfW, and Deka, with Clearstream and Cashlink operating the DLT infrastructure.
The Bundesbank joined Pontes and served as the paying agent at the end of October when the European Stability Mechanism executed its initial digital bond worth 1 billion euros across the platform.
